Enactment Of The Digital Assets Amendments To The New York Uniform Commercial Code

New York has joined 33 other states and the District of Columbia in enacting amendments to the Uniform Commercial Code promulgated by the Uniform Law Commission (the "ULC") in 2022 (the "Amendments") principally to address digital assets – "controllable electronic records" as defined in the Amendments. The effective date of the Amendments in New York is June 3, 2026. Parties should begin now to address the impact of the Amendments on their transactions since, after one year from the effective date (June 3, 2027), the Amendments will apply to preexisting transactions.

The Amendments add a new Article 12 (Controllable Electronic Records) to the Uniform Commercial Code, make extensive changes to Article 9 (Secured Transactions) and make largely conforming changes to some provisions of other articles of the Unform Commercial Code. New York's enactment of the Amendments includes non-uniform amendments not included in the model prepared by the UCC that are summarized below.

Digital assets include virtual currencies, non-fungible tokens, tokenized payment rights and electronic promissory notes. The Amendments address how to transfer free and clear of third party claims and to create and perfect security interest in "controllable electronic records" ("CERs"), similar to the rules that apply to purchasers and secured parties for goods and investment property (such as securities and commodities) under Articles 2, 8 and 9 of the Uniform Commercial Code, providing necessary certainty for transactions in these assets. Like investment property, security interests in controllable electronic records may be perfected by "control" and perfection by control will take precedence over a security interest perfected by filing.

A controllable electronic record is defined, somewhat circularly, as a record of information stored in an electronic form that is subject to control (UCC §. 12-101). As explained in the Summary prepared by the Uniform Law Commission¹, a "controllable electronic record" is a record of information in electronic form that is susceptible to "control." For a person to have "control" of a CER, the person must have:

• The power to enjoy "substantially all the benefit" from the CER,
• The exclusive power to prevent others from enjoying "substantially all the benefit" from the CER,
• The exclusive power to transfer control or to cause another person to obtain control of the CER.
• The person must be able readily to identify itself to a third party as the person having these powers (UCC § 12-105(a)).

The exclusivity requirement may be satisfied in most circumstances even if there is a sharing of these powers (UCC § 12-105(b)). Control may be accomplished through a third person such as a custodian who acknowledges that it holds the CER for another party (UCC § 12-105(c)). A transferee who is a qualified purchaser of a CER acquires the CER free from competing property claims in the CER, similar to a good faith purchaser for value of goods or a protected purchaser of investment property (UCC § 12-103(e)). Where an account or a payment intangible (as those terms are defined in Article 9 of the UCC) is evidenced by a CER, the obligor is obligated to pay to the transferee of the CER. Other law determines whether the transferee takes free of other rights that may be evidenced by the CER (See Official Comment 3 to UCC § 9-103). The ULC's Summary gives the examples of copyright law where the tethered asset is intellectual property or a competing interest in real estate that that is evidenced by a CER.

The Amendments also address how to create and perfect a security interest in virtual currency, update the rules relating to chattel paper and make other changes to the rules for negotiable instruments in Article 3, payment systems in Article 4A, sales and leases of goods in Articles 2 and 2A, documents of title in Article 7 and in Article 1's definitions of "writing" and "record" to facilitate electronic commerce, all as described in the ULC's Summary.

Non-Uniform New York Amendments.

The most significant non-uniform provision in New York's enactment of the Amendments is the carrying forward of the standard in New York law on when a purchaser is considered to have notice of an adverse claim to a negotiable instrument which would prevent the purchaser from taking free on adverse claims as a good-faith purchaser for value (UCC § 12-102(a)(2)). The heightened standard code – actual knowledge of the adverse claim or "knowledge of such facts that his action in taking the instrument amounts to bad faith" applies to the acquisition of a controllable electronic record as it has applied in New York to negotiable instruments (UCC § 3-304(7)).

As described in the report of the Task Force on Digital Technologies of the New York City Bar, cited below, New York's adoption of the Amendments also address, in UCC §§ 12-102(a)(3) and 12-103(c), the variations of New York's Electronic Signatures and Records Act (Article 3 of the New York State Technology Law) from the Uniform Electronic Transaction Act adopted in the other 49 states and the District of Columbia to provide for the recognition of digital assets and electronic records.

The Unform Act with Commentary and explanatory memoranda is available at: https://www.uniformlaws.org/committees/community-home/librarydocuments?communitykey=1457c422-ddb7-40b0-8c76-39a1991651ac&LibraryFolderKey=&DefaultView=&5a583082-7c67-452b-9777-e4bdf7e1c729=eyJsaWJyYXJ5ZW50cnkiOiIxZjIzODFkMC1kODc5LTQxMzctOTNmNS0zNmQ3MzQxYjM2ZDgifQ%3D%3D.

The New York legislation is available at: https://www.nysenate.gov/legislation/bills/2025/S1840/amendment/A

The February 2023 report by the Task Force on Digital Technologies of the Association of the Bar of the City of New York in support of the Enactment of the New York Version of the Amendments to the Official Test of the Uniform Commercial Code (2022) is available at: https://www.nycbar.org/emergingtechnology-amends-ucc-ny/

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